Re/code sources shed light on rules that may factor in upcoming spectrum auction.

On Monday evening, Re/code wrote about the complicated set of rules that the FCC's wireless bureau is hoping will be adopted for the TV spectrum auction that will take place in 2015. According to these restrictions, carriers with lots of spectrum like AT&T, Verizon, and Sprint, could be prohibited from bidding on up to one-third of the auctioned-off spectrum in a given area, at least when the bidding in that area reaches a particular price.

The auction rules would dictate how many licenses a wireless company could purchase by creating two classes of spectrum licenses: restricted and unrestricted. According to Re/code, all companies would be allowed to bid on the available spectrum at first, generally in blocks of 5 MHz. Then if the bidding reaches a “threshold price,” 30 MHz of the spectrum in that market would be reserved for smaller competitor companies.

Additionally, the FCC is looking to adopt new “spectrum screens” which would limit how much spectrum a wireless carrier could hold in a certain market. Under the rules, if a carrier tried to buy up more than a certain amount of spectrum in the market, that would trigger extra scrutiny at the FCC before the deal could go through. The upcoming availability of spectrum, combined with new rules for who can own it, has garnered a lot of attention.

The rules that Re/code's sources spoke about aren't set in stone yet and still need to be shown to other members of the FCC to get their approval. But the FCC's wireless bureau may be trying to strike compromises before the proposal has even drawn objections. Re/code explains the tension:

The proposal represents an effort by Wheeler’s aides to meet two broad, conflicting goals of the auction: Raise as much money as possible (by selling licenses to wireless giants AT&T and Verizon) while increasing competition in the wireless market (by selling licenses to smaller carriers that need more prime airwaves to compete for subscribers).

The TV spectrum auction has been in the works for many years and will involve TV stations voluntarily giving up some of their high-value broadcast spectrum in exchange for a check from the auction proceeds. Participating stations will either have to go off the air, or they can share spectrum with another station. That arrangement is currently being tested in Los Angeles with some success, although at the National Association of Broadcasters conference last week, attendees seemed reluctant to embrace the idea of sharing their airwaves.

The spectrum auction is also getting a lot of attention because it's likely the last of its kind for a while. “I caution you that the incentive auction opportunity is going to happen about a year from now and is unlikely to happen again,” Wheeler told an audience of broadcasters at the NAB conference.

Re/code notes that the FCC estimates that it will have about 85 MHz of spectrum in the 600 MHz band to auction off in urban areas, and possibly more in rural areas.

Critics also say that the auction and its rules will only be a partial solution to an underlying problem: that two cell carriers dominate the US market, and their competitors are largely priced out of the game. While smaller carriers will have some help in securing spectrum with the new “restricted license” designation, Public Knowledge Senior Staff Attorney John Bergmayer pointed out that competitors like Sprint might get cut out of bidding for restricted licenses because it owns a lot of high-band spectrum, which can't penetrate walls like the more valuable, low-band 600mHz spectrum can.

“[The FCC counts] all megahertz as being equal,” Bergmayer explained. “Sprint, after it bought Clearwire, has tons of spectrum, but it's not very useful. There's only so much that, say, T-Mobile can do with wild crazy price cuts and promotions. At a certain point if they don't have the network for customers, it's going to hurt them.”

One industry source told Ars that Verizon and AT&T currently account for about 80 percent of the low-band spectrum holdings. “There's a widespread recognition in the wireless industry that this current screen is broken; [the screening process] is not triggered in transactions that clearly do cause a threat to consumers,” the source, who asked not to be named, told Ars.

For now, though, there's little that interested parties can do besides adopt a holding pattern until the FCC's official rules come out, which is expected to be in mid-May. The FCC will have to vote on the rules as well, so revisions are likely in order.

Update: Ars has learned that the FCC is considering reserving up to 30 MHz of spectrum in urban markets for small carriers. This story originally said that the commission would reserve up to 30 percent of the available spectrum.

35 Reader Comments

I'm so sick of this. Why auction it once? Why not lease it year after year. Give them a 10 or 20 year lease so it's worth their infrastructure investment, but a one-time payment is a rip-off for the public. Even mining and grazing rights are leased, why not airwaves?

Unfortunately, I think these rules will simply cost citizens money through lower auction values. As to increasing competitiveness, bidders outside the big 4 (Verizon/ATT/TM/Sprint) simply won't have the economy of scale - They'll simply be gobbled up by the big boys in a few years when the FCC is looking elsewhere.

If we can get to 4 nationwide carriers, then there might be true competition. A bunch of mom and pop shops add no price pressure to the market.

What "smaller competitors"? Other than T-Mobile, the FCC has allowed the larger carriers to buy up all the smaller carriers and their spectrum. Heck, just recently AT&T bought leap, and t-mobile bought metropcs. US Cellular sold about a third of their major markets and spectrum to Sprint, and their current CEO seems to be gearing up for a full sale of the rest of the company.

If the FCC doesn't start blocking these buyouts, the only thing this screen will do is let the big carriers gobble up the spectrum at even cheaper prices by buying up the small time carriers that win the auction and then sell out.

I remind the readers once again that the TV stations never paid for their spectrum.

Watch for hedge funds/investors to buy money losing stations just to sell off their spectrum and go dark.

Major difference: TV and Radio stations don't charge their viewers/listeners to use the spectrum they got from the government. Also, TV and Radio stations have to periodically renew their license; hardly ever denied, but the fact that they have to renew helps keep them obeying the rules. Cellular providers charge their customers to use the spectrum they bought from the government, and once they buy it that spectrum is theirs forever.

Under the rules, if a carrier tried to buy up more than a certain amount of spectrum in the market, that would trigger extra scrutiny at the FCC before the deal could go through.

As kids, if we were doing something Dad didn't like he'd give us "The Eye". We'd get all serious and proper while Dad was looking, but as soon as he was gone, we'd giggle and go right back to doing what we were doing.

I remind the readers once again that the TV stations never paid for their spectrum.

Watch for hedge funds/investors to buy money losing stations just to sell off their spectrum and go dark.

Major difference: TV and Radio stations don't charge their viewers/listeners to use the spectrum they got from the government. Also, TV and Radio stations have to periodically renew their license; hardly ever denied, but the fact that they have to renew helps keep them obeying the rules. Cellular providers charge their customers to use the spectrum they bought from the government, and once they buy it that spectrum is theirs forever.

Look at it this way. The TV station has a crappy business and they just got a get our of jail free card. Such a deal!

If the TV station was profitable, they wouldn't sell.

I'm not sure why the NAB objects, unless this is going to be a regional deal rather than nationwide. If this spectrum isn't nationwide, then the deal is dumber than I thought.

All I see this as, and the nation-wide wireless plan, are things to make it seem like the FCC is doing something. Then thinking about it broadly, with Tom Wheeler having connections to the cable industry, who has it out for the wireless industry, this all makes sense--even though it won't do much, if at all.

All I see this as, and the nation-wide wireless plan, are things to make it seem like the FCC is doing something. Then thinking about it broadly, with Tom Wheeler having connections to the cable industry, who has it out for the wireless industry, this all makes sense--even though it won't do much, if at all.

I need to start making tin foil hats.

I used to have a tin foil hat, but Ars took the hats away. And it took me three weeks to get enough Ars coins to buy a hat. :-(

What the FCC should do is figure out how much spectrum is needed for TV and consolidate it. Now I have no objections to proceeds from the auction aiding TV stations in transitioning to a new frequency. Digital TV has less range than analog. I wouldn't object to giving station owners more of the refarmed spectrum to increase coverage. I just have a real hard time paying off a station to go dark.

For those on the forum in the SF Bay Area, DTV is a joke. Historically San Francisco was the big city, so the FCC built the market around SF. All the transmitter towers of the major networks are by SF. DTV left most of the south bay in the dark. The south bay could use some "parallel" stations simucasting the SF stations.

While we are at it, no more VHF DTV. Who the hell though maintaining two bands was a good idea.

>> I remind the readers once again that the TV stations never paid for their spectrum.

I may be wrong but they never paid twice. IIRC, part of the HD cutover wasall channels got new channel slots. They didn't pay for the original slot which went dark whenthe new one, which they didn't pay for either, went live.

Plus, as Rick*d pointed out, they could have lost the license if the FCC had decided they weren't"serving the public interest." So why are we paying them to vacate something they don't own andcan't use?

>> I remind the readers once again that the TV stations never paid for their spectrum.

I may be wrong but they never paid twice. IIRC, part of the HD cutover wasall channels got new channel slots. They didn't pay for the original slot which went dark whenthe new one, which they didn't pay for either, went live.

Plus, as Rick*d pointed out, they could have lost the license if the FCC had decided they weren't"serving the public interest." So why are we paying them to vacate something they don't own andcan't use?

Because good broadcasters do serve the public interest. And we do it without charging the viewers and while meeting every obligation the FCC demands we meet, which has large costs in order to comply with. If we don't meet the obligations or violate rules we can be fined and lose our license, we can't just sit on unused spectrum like wireless companies do. The cell companies should have to play by the same rules, instead they write a check once, and the public gets to pay them forever.

The other portion that has been overlooked is the complexity of repacking the TV stations into the new spectrum and the capital costs. When the DTV transition happened the digital stations had been live for several years in most parts of the country, even then the transition was not seamless. This transition will require stations to cut over with little to no testing beforehand as you run the risk of stepping on someone. In addition new antennas will be needed as well as new filters and new transmitters depending on the new frequency assigned. The filters will have to be sharp tuned filters, exciters will have to have very tight tolerances especially in large markets.

These are capital expenditures that usually have a 20 year depreciation cycle, and we aren't even close to the end of the current cycle for the gear purchased to do the DTV transition. Antenna, filter, transmitter and probably transmission line is $2 to $3 million easily. If you are able to reuse your transmitter, you are still looking at a million plus for the antenna and filters.

At the same time unless Canada and Mexico decide to agree to the new spectrum changes, you have a large area around the borders that those cell license will suffer interference from TV broadcasting in those countries. That would probably depress pricing too.

This also ignores how the current contour maps will change, most likely smaller due to interference issues packing stations closer together. Analog UHF stations averaged 5 megawatts ERP. DTV UHF stations average 1 megawatt ERP, part of why coverage shrunk because the FCC based reception on the viewer having a pole mounted antenna 35 feet in the air, they never considered indoor antennas so less power, bigger antennas needed to receive the signal. Sucks if you are an urban dweller with no ability to use a large antenna. They also based reception on double conversion tuners that have resistance to IM3 interference even though almost every tuner on the market ended up being a single conversion tuner that is very easily interfered with by IM3.

Are they only auctioning currently-used TV channels? What about the white spaces?

What little whitespace there is, will shrink dramatically after the repacking. Whitespace is barely usable in large urban areas, but will suffer in rural areas to after, as there will be less unused spectrum and more risk of interference. It really only ever stood a chance at being usable in rural areas to begin with. Now less so.

Sprint has the low end spectrum they need (800MHz acquired from the Nextel acquisition), and it's much bigger than any of the other low end bands in the US (35MHz). What they need is the capital to upgrade their network (including major backhaul upgrades), which is underway, and then building significantly more towers to cover rural areas with that spectrum. Oh and they need to either have Qualcomm figure out how to do simultaneous voice and data while moving between their 3 bands or they need to quickly roll out VoLTE because not being able to talk and lookup data (even over WiFi!) in 2014 is abysmal.

We need a national network that every carrier plays on. Period. Cut out spectrum from the equation and watch real competition occur from the smallest carrier to Verizon and ATT. In its current state nothing will change. Even with these changes. I sped $110 for unlimited calls and 6GB of shared data between devices. This is a joke. I want to go to another carrier but the simple fact is that Verizon, at least in Minneapolis, has one of the best networks out there. If there was a national infrastructure that was available to all and had a robust tower system, The little guy could slay the likes of Verizon by offering better customer service, better selection of phones, and no bloatware on said phones. But that will never happen in this messed up country. Because the minute you say national, you have people screaming socialism. Meanwhile ignoring how our road system works in most of the US.

The FCC needs to stop fooling itself that it can control private companies. It needs to do what its charter says it does and regulate radio communications. It needs to stop letting companies do whatever they want with public resources and tell them what can and cannot be done.

"Dell probably isn't trying to become a media mogul, or use stations to broadcast infomercials for Dell computers.

It's more likely that his investment team is making a real estate play. The stations have swaths of spectrum, which the FCC is planning to reclaim and auction off to companies developing wireless broadband networks.

Details aren't final and TV broadcasters aren't keen on the plan, but stations giving up spectrum would be compensated with proceeds from the auctions."

Now do you think I'm wearing a tin foil hat?

Hello Ars... how about some investigative journalism. Name them and shame them. Just who else has bought bankrupt TV stations lately?

I'm so sick of this. Why auction it once? Why not lease it year after year. Give them a 10 or 20 year lease so it's worth their infrastructure investment, but a one-time payment is a rip-off for the public. Even mining and grazing rights are leased, why not airwaves?

The auction is for a limited-term license to use the spectrum in question. It's not 'forever', unless something radical has changed at the FCC, and somehow nobody's said anything about it.

Edited to add: I must note that I've not paid as close attention to this auction as I have other events, so maybe something has changed, but I'd be very surprised if the licenses didn't have fixed terms. That said, renewing at the end of a license term isn't the same thing as having that license go back up for auction. The second thing might be closer to what rick*d is asking for.

Require everyone who gets new spectrum to sell roaming to other networks for a fixed price. There's a limited amount of spectrum, so the only way to level the playing field is to make sure it's usable by all.

This is pretty much how the spectrum auction resulting from the UK's transition from analog to digital TV was handled. The big mobile providers made a big stink and moan about smaller providers effectively getting cheaper prices, but it's worked out that one of the smaller winners of spectrum (Three) have now forced the other's to dramatically lower their 4G contract prices and up data allowances by outcompeting them.

I'm not sure why the NAB objects, unless this is going to be a regional deal rather than nationwide. If this spectrum isn't nationwide, then the deal is dumber than I thought.

The auction is nationwide. The FCC breaks up the spectrum geographically because some areas are worth more than others. For example, Los Angles is going to be more profitable than San Francisco, not only because of population, but because it's a big bowl-shaped city where towers can cover a large area. SFO is very hilly and coverage requires more towers, lowering margins. And consider that rural places like Wyoming might never be profitable.

The NAB objects because it's their job. They don't want to see any spectrum allocated for OTA TV removed no matter what. And despite what we're told, in fringe reception areas there can be issues with co-channel interference. I'm a ham radio operator. I'm also in the ARRL because they try to protect amateur bands from commercial (and government/military) incursion for much the same reason. There's more to spectrum than commercial interests.

I'd really like to see just how well the carriers are using the bandwidth they already have before we start throwing more at the problem. I know there are lots of areas that restrict towers because some view them as eyesores, but the FCC could step in and demand communities work out solutions that will let the operators maximize their spectrum use.

This auction could be great in rural areas to get point to point broadband to homes, given the nature of the band. Instead it will just end up adding even more cell phone (i.e.: high cost) coverage.

I'd really like to see just how well the carriers are using the bandwidth they already have before we start throwing more at the problem. I know there are lots of areas that restrict towers because some view them as eyesores, but the FCC could step in and demand communities work out solutions that will let the operators maximize their spectrum use.

This auction could be great in rural areas to get point to point broadband to homes, given the nature of the band. Instead it will just end up adding even more cell phone (i.e.: high cost) coverage.

Remember it not only takes years to figure out where to get more spectrum and how to move legacy users off prior to auctioning it; it then takes several years after the auction for a large scale build out to be completed. For the maintaining spectrum supply, the FCC needs to concentrate not on the here and now; but 5 to 10 years in the future in order to make sure the supply will remain adequate.

I'd really like to see just how well the carriers are using the bandwidth they already have before we start throwing more at the problem. I know there are lots of areas that restrict towers because some view them as eyesores, but the FCC could step in and demand communities work out solutions that will let the operators maximize their spectrum use.

This auction could be great in rural areas to get point to point broadband to homes, given the nature of the band. Instead it will just end up adding even more cell phone (i.e.: high cost) coverage.

We need a national network that every carrier plays on. Period. Cut out spectrum from the equation and watch real competition occur from the smallest carrier to Verizon and ATT. In its current state nothing will change. Even with these changes. I sped $110 for unlimited calls and 6GB of shared data between devices. This is a joke. I want to go to another carrier but the simple fact is that Verizon, at least in Minneapolis, has one of the best networks out there. If there was a national infrastructure that was available to all and had a robust tower system, The little guy could slay the likes of Verizon by offering better customer service, better selection of phones, and no bloatware on said phones. But that will never happen in this messed up country. Because the minute you say national, you have people screaming socialism. Meanwhile ignoring how our road system works in most of the US.

*sighs*

"But that will never happen in this messed up country. Because the minute you say national, you have people screaming socialism. Meanwhile ignoring how our road system works in most of the US."

Good times, good times. See, that's one's right in the Constitution. No, seriously, right there in the preamble: "provide for the common defence". The freeway system was authorized to be built for the military. The president for whom it is named, Dwight D. Eisenhower, championed it after watching a similar model work very effectively in Germany.

"As one of the components of the National Highway System, Interstate Highways improve the mobility of military troops to and from airports, seaports, rail terminals, and other military bases. Interstate Highways also connect to other roads that are a part of the Strategic Highway Network, a system of roads identified as critical to the U.S. Department of Defense.[27]"

Please keep this in mind before you start agitating for the government to build telecom infrastructure. The freeway system was built with federal dollars to move troops effectively. Who do you think will be building the telecom infrastructure? Keep in mind that the National Security Agency is part of the Department of Defense.

The TV spectrum auction has been in the works for many years and will involve TV stations voluntarily giving up some of their high-value broadcast spectrum in exchange for a check from the auction proceeds. Participating stations will either have to go off the air, or they can share spectrum with another station.

Makes me wonder if this is part of long time cable lobbyist Wheeler's plan to get rid of broadcast TV. The cable/satellite companies have been trying to kill broadcast TV for years and cable cutting has become more and more a problem for them as consumers rebel against their high (and constantly rising) prices. I know many people who have dumped cable/satellite and many more who are on the verge. The most common configuration seems to be to switch to broadcast for local stations and add a streaming box such as Roku for Netflix or Amazon Prime and the many other online alternatives. So is this TV spectrum selloff just an end around, another attempt to at least partially kill broadcast television?

I'd really like to see just how well the carriers are using the bandwidth they already have before we start throwing more at the problem. I know there are lots of areas that restrict towers because some view them as eyesores, but the FCC could step in and demand communities work out solutions that will let the operators maximize their spectrum use.

This auction could be great in rural areas to get point to point broadband to homes, given the nature of the band. Instead it will just end up adding even more cell phone (i.e.: high cost) coverage.

I'd really like to see just how well the carriers are using the bandwidth they already have before we start throwing more at the problem. I know there are lots of areas that restrict towers because some view them as eyesores, but the FCC could step in and demand communities work out solutions that will let the operators maximize their spectrum use.

This auction could be great in rural areas to get point to point broadband to homes, given the nature of the band. Instead it will just end up adding even more cell phone (i.e.: high cost) coverage.

The FCC does not have the authority.

What authority does the FCC lack?

The authority to compel local governments to allow tower installs. It's not in their mandate, and therefore would require legislation.

We need a national network that every carrier plays on. Period. Cut out spectrum from the equation and watch real competition occur from the smallest carrier to Verizon and ATT. In its current state nothing will change. Even with these changes. I sped $110 for unlimited calls and 6GB of shared data between devices. This is a joke. I want to go to another carrier but the simple fact is that Verizon, at least in Minneapolis, has one of the best networks out there. If there was a national infrastructure that was available to all and had a robust tower system, The little guy could slay the likes of Verizon by offering better customer service, better selection of phones, and no bloatware on said phones. But that will never happen in this messed up country. Because the minute you say national, you have people screaming socialism. Meanwhile ignoring how our road system works in most of the US.

*sighs*

My hope is that as the current and upcoming generations continue to come into power, they'll allow more liberal ideas to take root in law. They weren't raised in the era of McCarthyism and the Red Scare...although I suppose that one could make an argument that the current War on Terror is just another iteration.

We need a national network that every carrier plays on. Period. Cut out spectrum from the equation and watch real competition occur from the smallest carrier to Verizon and ATT. In its current state nothing will change. Even with these changes. I sped $110 for unlimited calls and 6GB of shared data between devices. This is a joke. I want to go to another carrier but the simple fact is that Verizon, at least in Minneapolis, has one of the best networks out there. If there was a national infrastructure that was available to all and had a robust tower system, The little guy could slay the likes of Verizon by offering better customer service, better selection of phones, and no bloatware on said phones. But that will never happen in this messed up country. Because the minute you say national, you have people screaming socialism. Meanwhile ignoring how our road system works in most of the US.

*sighs*

My hope is that as the current and upcoming generations continue to come into power, they'll allow more liberal ideas to take root in law. They weren't raised in the era of McCarthyism and the Red Scare...although I suppose that one could make an argument that the current War on Terror is just another iteration.

Yeah, there might have been something to that, by the way. McCarthy may have been a bit of a nutter, but that doesn't mean the government wasn't rife with Soviet spies. I'm sure their government had many of our spies as well, as evidenced by all the defectors. The Soviets just had a "more efficient" way of dealing with them if they were compromised.

The TV spectrum auction has been in the works for many years and will involve TV stations voluntarily giving up some of their high-value broadcast spectrum in exchange for a check from the auction proceeds. Participating stations will either have to go off the air, or they can share spectrum with another station.

Makes me wonder if this is part of long time cable lobbyist Wheeler's plan to get rid of broadcast TV. The cable/satellite companies have been trying to kill broadcast TV for years and cable cutting has become more and more a problem for them as consumers rebel against their high (and constantly rising) prices. I know many people who have dumped cable/satellite and many more who are on the verge. The most common configuration seems to be to switch to broadcast for local stations and add a streaming box such as Roku for Netflix or Amazon Prime and the many other online alternatives. So is this TV spectrum selloff just an end around, another attempt to at least partially kill broadcast television?

There's a lot of TV spectrum that's not very useful for phones; the longer wavelengths would require antenna on the phones. Unless the FCC plans to re-purpose that spectrum as well, there should be plenty available for the networks to use. Of course, free over-the-air TV that only generates income from commercials. That doesn't give them nearly as much profit as cable, where you pay for the privilege to watch commercials. Just like going to the movies.

I'd really like to see just how well the carriers are using the bandwidth they already have before we start throwing more at the problem. I know there are lots of areas that restrict towers because some view them as eyesores, but the FCC could step in and demand communities work out solutions that will let the operators maximize their spectrum use.

This auction could be great in rural areas to get point to point broadband to homes, given the nature of the band. Instead it will just end up adding even more cell phone (i.e.: high cost) coverage.

The FCC does not have the authority.

Actually, they do. The FCC has published guidelines for municipalities to follow for towers and other antennas (including ham radio antennas), and has declared that governments cannot regulate home satellite dishes and TV antennas.